Driving a Spike:
Court Lets Landlords End Rent Discounts
By Matt Pacenza

On May 21, a tenant called the Metropolitan Council on Housing’s hotline to ask if his landlord could legally take away the rent discounts he’d been getting for several years. Recognizing a jump in the neighborhood’s housing market, his building’s owner wanted to significantly raise the rent, to the maximum level allowed under the state’s rent-regulation laws.

Don’t worry, you’re safe, Met Council organizer Dave Powell told the caller. New York’s housing laws prohibit landlords from making a switch like that until the current tenant moves out, he explained. Powell’s answer was correct--until the next day, when the Appellate Division of the New York Supreme Court ruled that anytime a lease comes up for renewal, landlords can raise the rent to the full amount allowed under state rent regulation.

For tenants in neighborhoods like Harlem, Bushwick and East Williamsburg, where once-struggling housing markets are now heating up, rents could as much as double. And, as some advocates predict, it could mean a spike in evictions of low-income tenants. "This will give landlords a real incentive to jack up rents if they have other tenants who are willing to pay that price," says Powell.

The Appellate Division’s 3-2 ruling threw out a decision made by the state Division of Housing and Community Renewal in 1997 that rejected a landlord’s request to charge higher rents for tenants who had been paying what are technically known as "preferential" rents. In that case, the Missionary Sisters of the Sacred Heart sought to raise an East Village tenant’s rent by $70, 5% more than the rate they’d charged for the previous two years. The court has now essentially said, "Go for it": There is no reason to conclude "that the preference was to survive after the economically depressed market recovered."

While in the case of the Sisters the hike is relatively small, the discounts vary widely. Reduced or "preferential" rents are a common practice among landlords who want to "get a jump start in so-called pioneer neighborhoods," says Steve Smollens, an attorney who has represented tenants in similar disputes.

Landlords, however, applaud the decision, saying the reductions were always meant to be short-term. "It’s always offended me that if an owner did a favor for a tenant, that became permanent," says Dan Margulies, president of the Community Housing Improvement Project, a landlord group.

Meanwhile, tenants hope DHCR will appeal-as of late May, the agency had not yet decided how to respond to the ruling-but say they can’t help but be skeptical. "DHCR could easily roll over," says Ken Rosenfeld, legal director for the Northern Manhattan Improvement Corporation. "I’m really scared they’ll decide to not fight this. If it stands, it’s a major blow for tenants in gentrifying neighborhoods."

Reprinted with permission from City Limits Weekly.